The View From 1776

The Minimum Wage, Outsourcing, and Nazism

Creating an economic and social world minutely regulated by social-engineers and invulnerable to economic and political events in the rest of the world was the primary goal of Nazism.  It is also the goal of American liberal-socialists.

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This article is in two main parts:  first, what is really going on, and, second, how it came about.

First Part:

Our nation was built by people who had to be self-reliant to survive and to prosper, people whose only expectation was that the government would protect them from outlaws and foreign enemies.  They knew that their well-being would come from their own hard work, ingenuity, prudence, thriftiness, and saving for the future of their families.  Their incentive was the knowledge that they would be able to keep the fruits of their own hard work.

In contrast, liberal-socialism’s built-in bias is to impose a new regulation for every inconvenience that our welfare-state citizens complain about.  Liberals believe that the goods and services available to citizens result from the structure of government, not from individual efforts responding to free-market prices.  In that view, society’s well-being is a function of social justice, aimed at redistributing income and property as equally as possible.  In the religious catechism of liberal-socialism there can be no social justice and no well-being without centralized governmental power to regulate economic activity in accord with state planning.

Since 1933 when Franklin Roosevelt’s New Deal, emulating Soviet Communism and Italian Fascism, replaced our original Constitution with socialism, four generations have grown to maturity with the assumption that the role of government is to protect them from their own folly and profligacy.  If heedless pursuit of sensual gratification results in venereal diseases, HIV, drug addiction, or depression, it’s not their personal responsibility.  If they spend beyond their means on credit-card debt, the government must pay their bills and take care of them in retirement and ill health.  Big business oppression is the cause of their sorry state, and government exists to make big business pay.

Liberals always have a John Edwards ready to file a class-action suit and extort vast sums from any corporation foolish enough to make products that people want to buy.  This is known euphemistically as “consumer rights.”  What can’t be extracted with multi-billion dollar damage suits must be paid for by the government welfare system.  But in no case must individuals be held accountable for their own actions.  That would be mean-spirited and uncaring; it would not be liberal social justice. 

“Caring,” however, entails consequences.

Socialism requires open-ended growth of government regulation, because it substitutes government fiat for individual freedom of choice.  Each new regulation creates its own unanticipated dislocations and problems in other sectors of the economy. Regulation must be piled atop regulation.  There is no convenient stopping point, because every regulation creates new problems and because every favor to a special-interest group produces demands from other special-interest groups for their share of the Federal goodies.  More and more sectors of political and economic life must be subjected to new regulations each year.

This internal necessity to add endless reams of regulations means that socialism tends inevitably toward totalitarianism. When peoples’ lives are not regulated by the free market, only intellectual planners in government or public education can call the shots.  We should recognize that socialistic planning is what produced the Soviet Union, Fascist Italy, and Nazi Germany.

Unfortunately, regulatory provisions to impose social justice within a nation can’t stop there.  Socialism pushes nations toward self-sufficiency, because economic and political competition from other nations interferes with internal regulation of economic conditions.  Price controls and unemployment regulations, for example, won’t work if there are no trade barriers against import competition.  A socialistic economy must be walled-off from the rest of the world to avoid import competition and to prevent export of capital to more attractive investments in other countries.

What quickly becomes apparent is that, even with tightly sealed borders, no nation can become self-sufficient without conquering other nations to gain control of supplies of vital raw materials and markets for its products.

Thus we had Nazi Germany and Soviet Russia determined to become world empires.

These tendencies are inevitably asserting themselves in the United States.  Both Democrats and Republicans once favored free trade and open world markets.  Today liberals are supporting organized, big labor in opposing free-trade agreements and in imposing ever more extensive regulatory control of American economic activity.  That regulatory urge now extends to telling other nations what kinds of working conditions they must impose on their citizens if they want to sell their goods in the United States.  The aim is to insulate American business and employment from worldwide economic competition so that they can be tightly controlled by Federal planners and bureaucratic social-engineers.

For example, Senator Ted Kennedy and his puppet John Kerry perennially call for increases in the minimum wage.  And Senator Kerry declares that he will impose regulations to stop “Benedict Arnold” corporations from outsourcing jobs overseas.  They are following in the footsteps of the Nazis, who imposed such measures to revive the German Reich in the 1930s and to make it into a self-sufficient imperial power.

History repeatedly shows, however, that other nations seldom are interested in promoting what regulators think is good for our economy.  The problem is that regulatory measures to control our economy almost always affect the economies of other nations, and those nations take counter-measures.  Thus are born trade wars, and sometimes military wars. 

Whether justified or not, war reparations and severe restrictions on German industry and employment imposed by the victors after World War I were cited by Hitler as justifications for annexing Austria, parts of Czechoslovakia, Poland, and eventually for attacking Soviet Russia.

Liberals like Senator Kerry unctuously proclaim their fidelity to “the community of nations” and to restoring our reputation around the world.  Yet halting outsourcing of jobs to India, for instance, will kick the legs from under a rapidly rising Indian middle class and impact India’s balance of payments. 

Outlawing outsourcing will raise production costs for American companies and make them less competitive with foreign companies, both in the United States market and in other countries.  Higher tariffs and import quotas against foreign competitors will be necessary to prevent loss of jobs here, as American companies’ sales decline under import competition.  India and other nations losing revenues from American outsourcing will have less purchasing power for American exports, causing further loss of jobs in America. 

The only “benefit” is that organized labor can keep its high-cost jobs.  The bill for this sort of economic planing is paid by consumers via higher prices and a reduced array of product choices.  And it’s paid by the vast majority of workers who are not part of the liberal-favored, socialistic union structure.  They will have fewer jobs and lower wages to make up for organized labor’s grabbing a bigger part of total wages.  It is, in other words, merely liberal favoritism, a method for redistributing income and property in accord with socialistic dogma.  But to the average, simplistic liberal, uneducated in economics and unaware of the collateral costs, prohibiting outsourcing is social justice; it’s merely taking ill-got gains from rich corporations and giving them to the workers who deserve them.

The minimum wage and its relative, the living wage, are “me too” efforts by liberals to make Congress into a sort of Federal Reserve for regulating wages.  If Alan Greenspan can regulate the volume of credit via manipulating basic interest rates (a questionable assumption), then why can’t Congress regulate wages by manipulating entry-level wages?

Liberals argue that a higher minimum wage benefits “American workers.”  But does it?

No one has ever demonstrated that higher minimum wages lead to higher employment and increased prosperity.  Liberals can only argue that a higher minimum wage doesn’t reduce employment.  But even that case rests upon widely questioned conclusions in a single study of fast food restaurants in one small area of New Jersey in the short time span of a few months.

It defies logic and human experience to imagine that businesses employing fewer than 150 people, the largest number of enterprises in the country, will not be unfavorably impacted by having to pay higher wages, taxes, and social Security benefits for the same amount of work from their existing employees.  To deny this, you have to believe that the average small business is enormously profitable and that a conspiracy among these millions of businesses deliberately holds wages below what they can really afford to pay.  Or else you have to assume that such businesses can easily raise their selling prices and let consumers pay for increases in the minimum wage.

In any case, the minimum wage is simply an instance of state planners ignoring market realities and imposing price controls.  The end result of the higher minimum wage is to lever up wages and prices at all levels.  Who benefits the most?  Naturally, union labor, the darlings of liberal-socialists.

Theoretically, higher wages put more purchasing power into the economy, but not if small businesses can’t afford to hire more workers or have to lay off some existing employees to avoid going broke.  True increases in economic well-being are nothing more nor less than increased production of useful goods and services. 

If you gain higher nominal wages, but must pay higher prices, you have made no real gains.  In cases where businesses can offset the higher minimum wage with higher selling prices, people just pay higher prices for the same volume of goods and services, rendering the whole exercise an illusion created by socialistic politicians to bedazzle an uneducated public. 

Increasing businesses’ production costs with higher wages is a deterrent to additional production.  Businesses invest in higher production capacity in response to the incentive of potentially higher profits and an acceptable risk/reward ratio.  Raising risks by increasing costs is a disincentive to investing in increased production.

In the real world, wages increase without government intervention as production increases and the level of unemployment drops.  Businesses are compelled to pay higher wages to attract workers in order to increase production.  Higher wages in that case are not inflationary, unless the government has artificially created excessive credit that over-stimulates capital investment, because the balance of available goods and purchasing power is maintained. 

It was, by the way, artificial expansion of credit by the Treasury and the Federal Reserve that led to the Great Depression of the 1930s and to the dot.com bubble under the Clinton administration in the 1990s.  Excessive credit not supported by real savings misled businesses to assume that potential demand for increased output was greater than it proved to be.  Thus, for example, wild expectations of exponential growth in internet traffic led to investment in fiber optical cables and switching capacities vastly greater then really needed.  The financial markets were awash with so much artificial credit that companies that never had produced a product could go public, raising a couple of billion dollars based on nothing more than a speculative expectation.

When it became apparent in the final years of Clinton’s administration that the real savings rate was negative and that further sales increases required unlimited expansion of consumer debt, Clinton’s “prosperity” and “balanced budget” collapsed.

On the other hand, while the artificial boom lasted, higher prices and higher wages produced nominally higher taxable incomes and poured more money into Federal coffers for new welfare-state programs.  Coupled with a roughly 30 percent reduction in defense spending, this created the illusion of balancing the Federal budget. 

While Treasury Secretary Robert Rubin solemnly told the public that the government was paying off public debt, in reality the Federal debt continued to rise unabated.  The slight of hand was accomplished by using temporary surpluses in Social Security revenues to purchase Federal debt in public hands and replace the purloined Social Security funds with non-marketable Treasury debt.  This was the equivalent of telling everyone that you were now debt free, because you had paid off your credit card debt with the proceeds of a second mortgage on your house. 

If you want to verify this, just go to the United States Treasury’s own website at http://www.publicdebt.treas.gov/opd/opd.htm.

Second Part:

How did we get into this downward spiral?

Anyone who looks at what was actually said and done under the banner of socialism and state planning in the 1920s and 1930s is struck by the public’s loss of faith in the political liberty and individualism that had brought England to domination of world trade in the 19th century and had laid the foundation for the United States’s becoming the industrial colossus of the world.

World War I and the economic Depression of the 1930s shattered traditional faiths.

State planning was advertised as scientific in an age that had benefited enormously from advances in the physical sciences.  Not to advocate socialism was viewed as willful ignorance.

In that climate of opinion, Hitler’s National Socialist German Workers Party (the Nazis) came to power by democratic means, electing enough members to the Reichstag to gain legitimate control of the government.  Nazis appealed to the German middle class and workers by promising to exclude the landed aristocracy from political power and bring big business to heel. 

On January 30, 1933, President von Hindenberg appointed Hitler Chancellor of the German Reich.  Two days later Hitler delivered his official address to the German people, in which he declared:

“The National Government will regard it as its first and foremost duty to revive in the nation the spirit of unity and co-operation. It will preserve and defend those basic principles on which our nation has been built. ....

Turbulent instincts must be replaced by a national discipline as the guiding principle of our national life. All those institutions which are the strongholds of the energy and vitality of our nation will be taken under the special care of the Government.

The National Government intends to solve the problem of the reorganization of trade and commerce with two four-year plans:

The German farmer must be rescued in order that the nation may be supplied with the necessities of life….

A concerted and all-embracing attack must be made on unemployment in order that the German working class may be saved from ruin….

The National Government will, with iron determination and unshakable steadfastness of purpose, put through the following plan:

Within four years the German peasant must be rescued from the quagmire into which he has fallen.

Within four years unemployment must be finally overcome. At the same time the conditions necessary for a revival in trade and commerce are provided.

The National Government will couple with this tremendous task of reorganizing business life a reorganization of the administrative and fiscal systems of the Reich, of the Federal States, and the Communes.”

Three months after Hitler became German Chancellor, Franklin Roosevelt took the oath of office as President and delivered his first inaugural address. Most people know only the famous phrase, “We have nothing to fear but fear itself.”  But the main part of the speech was devoted to language almost identical to what Adolph Hitler had been saying for more than ten years.

President Roosevelt’s version of Hitler’s speech included the following:

“?Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply.  Primarily, this is because the rulers of the exchange of mankind?s goods have failed through their own stubbornness and their own incompetence??True they have tried, but their efforts have been cast in the pattern of an outworn tradition.?The means of restoration lies in the extent to which we apply social values more noble than mere monetary profit.?

Restoration calls, however, not for changes in ethics alone.  The nation asks for action, and action now.  Our greatest primary task is to put people to work?It can be accomplished in part by direct recruiting by the government itself, treating the task as we would treat the emergency of war??Hand in hand with this, we must frankly recognize the overbalance of population in our industrial centers and, by engaging on a national scale in the redistribution, endeavor to provide a better use of the land for those best fitted for the land.?It can be helped by the unifying of relief activities which today are often scattered, uneconomical and unequal.

It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definite public character.

?if we are to go forward we must move as a trained and loyal army willing to sacrifice for the good of the common discipline, because, without such discipline, no progress is made?We are, I know, ready and willing to submit our lives and property to such discipline because it makes possible a leadership which aims at a larger good.?

With this pledge taken, I assume unhesitatingly the leadership of this great army of our people, dedicated to a disciplined attack upon our common problems.?Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangements without loss of essential form [in other words, New Deal lawyers can interpret it to mean anything that fits their purposes]?

It is hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us.  But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure.?But in the event that the Congress shall fail to take one of these two courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me.??

One newspaper, reporting on the inaugural, summed it up with the headline, ?Roosevelt Declares for Dictatorship if Necessary.?

Before 1933, no President would have viewed the economy of the nation as a single unit which he could manage, almost as if it were it were a private corporation and he were its CEO.  This enormous presumption, tested in Germany, France, the USSR, and England after World War II, as well as here, has failed to meet the promises of social scientists.  Yet it remains an alluring prospect for an American electorate left ignorant of history and economics by our socialized public education system.

Present-day anti-Americanism in our colleges and universities is the mirror image of pronouncements by faculties in German universities in the late 19th century, when they became the self-styled defenders of the political policies of Prussian statism that were to lead directly to World War I and Hitler’s National Socialism.

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